The most reliable business in the world is selling something that gets used up. This week the Pentagon put a number on how much has been used up.
The Order
The Pentagon earmarked more than $120 billion for contractors to step up production of Patriot missiles and long-delayed submarines.
Lockheed Martin’s Patriot contract is now valued at nearly $59 billion, a big expansion of an order announced in April.
General Dynamics Electric Boat and HII Newport News Shipbuilding received a $76.6 billion deal for nine Virginia-class and five Columbia-class submarines, delivering through 2038. Lockheed also has a preliminary $35 billion contract for Thaad interceptors.
Both missile contracts span seven years. That is the point. The military has moved to multiyear agreements instead of annual purchases, so suppliers will actually build factories.
Patriots are in demand because they have been used heavily, in the Iran war and in Ukraine. The newest ones cost around $4 million each and take years to produce.
The Fine Print, Which Matters
Congress still has to fund these deals every year. The Patriot and Thaad agreements are undefinitized contracts, meaning the full money is not yet appropriated.
Lawmakers in both parties have raised eyebrows at the administration’s $1.5 trillion military request, though munitions spending has broader support.
This is the distinction we keep drawing with the AI build-out. One is financed by an appropriation with political risk attached. The other is financed by a bond with a coupon attached. Both can disappoint. They disappoint differently.
The Earnings Underneath
General Dynamics posted a profit of $1.16 billion, or $4.24 a share, for the quarter ended July 5. A year earlier it was $1.01 billion, or $3.74. Analysts wanted $3.96.
Revenue rose 8.1% to $14.09 billion, ahead of the $13.52 billion Wall Street expected, and grew in all four segments.
Marine systems, the biggest, brought in $4.66 billion, up 10%. Aerospace grew fastest, up 15% to $3.53 billion. Orders totaled $20 billion in the quarter, and backlog stands at $136.5 billion.
Backlog is the least glamorous word in this business and the most useful. It is revenue that already survived a negotiation.
Boeing, and a Truck With a Clearance
Boeing spent another quarter in the red. Its net loss of $428 million narrowed from $612 million a year earlier, sales climbed 8%, and shares rose nearly 5%.
The presidential-jet program cost another $280 million. The company opened a new 737 MAX line in Everett, Washington, aiming for 47 planes a month, up from 42.
Then there is Ford, which is not a defense contractor and is behaving like one. Chief Executive Jim Farley confirmed a Defense Department contract to build prototype tactical trucks.
“Ford always answers the call to duty,” he said. Ford also raised its full-year outlook and shares rose 7% after hours.
The Pentagon has been asking American automakers to take a bigger role in weapons production. That is a small detail with a large implication.
When the government starts recruiting car companies to build military hardware, it is telling you the existing supply chain is full. Full supply chains are how backlogs turn into pricing power.
Why This Build-Out Is Different
Officials were already planning to increase missile production before the Iran war started in February. The war added urgency, not the idea.
Replenishing stockpiles and expanding shipbuilding have been priorities and pain points for years. That is the part investors underrate.
A trend that predates the headline usually outlives it. The order book here does not evaporate the morning a ceasefire is announced, because the magazine still has to be refilled.